U.S. and Mexican trade officials begin a third round of high-stakes negotiations on Tuesday aimed at rewriting key elements of the North American trade agreement, as President Donald Trump’s administration intensifies efforts to reshape regional supply chains and expand U.S. manufacturing while escalating trade pressure on Canada.
The three-day talks in Mexico City are the first formal negotiations on revising the United States-Mexico-Canada Agreement (USMCA) since the Trump administration declined on July 1 to extend the six-year-old trade pact, triggering a 10-year countdown after which the agreement could expire unless all three countries agree on a revised framework.
The negotiations are taking place without Canada, highlighting growing divisions within North America’s trading bloc after Washington imposed a fresh round of punitive tariffs on Canadian goods on Monday.
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The exclusion of Canada from the latest talks underscores the Trump administration’s preference for advancing bilateral negotiations with Mexico, which U.S. officials have described as more constructive, while relations with Ottawa have deteriorated over retaliatory tariffs and broader trade disputes.
USMCA, which replaced the North American Free Trade Agreement (NAFTA) in 2020 during Trump’s first term, underpins nearly $1.6 trillion in annual trade among the United States, Mexico and Canada, making it one of the world’s largest regional trade arrangements.
Business groups across North America have urged the administration to preserve the agreement’s trilateral structure and maintain largely tariff-free trade, warning that prolonged uncertainty could discourage investment and disrupt highly integrated manufacturing supply chains.
U.S. Trade Representative Jamieson Greer, who is scheduled to join the negotiations on Wednesday, said President Trump’s primary objective is to reduce America’s trade deficits with its North American partners while encouraging more production to return to the United States.
“The number one goal” is to reduce U.S. trade imbalances and bring manufacturing back home, Greer said in an interview with CNBC.
According to U.S. Census Bureau data, the U.S. goods trade deficit with Mexico widened by $28 billion, or 17%, last year to $197 billion, while the trade deficit with Canada narrowed by $12.9 billion, or 21%, to $48.3 billion.
Greer said the administration is already seeing progress, citing automakers that have announced plans to expand production capacity in the United States.
“We want the outcomes to make sense. We want to have more auto manufacturing here, and we’re seeing it,” Greer said, pointing to Toyota’s decision to expand truck production at its Texas plant, which will manufacture vehicles previously assembled in Mexico.
“So that’s the outcome that he wants,” Greer added.
He also said the administration wants a revised agreement that increases North American content in products traded across the region.
“I think also if we can have an arrangement with Mexico, with Canada, that we are trying to emphasize Canadian, Mexican, U.S. content in goods traded in North America, that’s a good outcome because that helps get supply chains back here in North America.”
A major focus of the negotiations remains the automotive sector, one of North America’s most integrated industries.
During bilateral discussions in May, the Office of the U.S. Trade Representative proposed requiring that 50% of the value of every North American-built vehicle originate in the United States, a significant tightening of the current rules of origin.
Such a requirement would represent one of the most consequential changes to USMCA, forcing automakers to redesign supply chains that have evolved over decades across the United States, Mexico and Canada. Industry executives have warned that stricter domestic content rules could increase production costs and reduce the competitiveness of North American vehicles globally.
Beyond automobiles, negotiators are expected to discuss steel, aluminum, agriculture, labor standards and intellectual property protections.
Economic Security and China
Another central theme is what the Trump administration calls “economic security,” an effort to strengthen regional production while limiting China’s ability to access the U.S. market through North American partners.
Washington is pushing Mexico and Canada to adopt trade policies more closely aligned with those of the United States, including imposing stronger barriers on goods originating outside the region. People familiar with the negotiations say the U.S. wants its partners to implement similar restrictions on imports of vehicles, auto parts, steel, aluminum and other industrial products from non-North American countries.
China’s growing presence in Mexico’s automotive market has emerged as a particular concern.
Reuters reported this week that Chinese vehicle sales in Mexico increased 30% during the first half of 2026, even after Mexico imposed 50% tariffs on Chinese vehicles in January. Chinese automakers have increased their market share in Mexico to 17%, up from 14% a year earlier.
U.S. officials worry that Chinese manufacturers could use Mexico as a production and export platform to gain preferential access to the U.S. market under regional trade rules.
Mexico enters the negotiations seeking exemptions from several Trump administration tariffs while broadly supporting efforts to strengthen North American manufacturing.
Mexico’s new ambassador to the United States, Roberto Lazzeri, said last week he expects a revised agreement to be completed before the end of the year.
“Every moment that we’re losing, I think we are losing competitiveness, market share and investment, so it’s in the best interest of all three of us to get to a position of resolution soon,” Lazzeri said.
He said Mexico shares Washington’s objective of expanding manufacturing across North America, including within the United States.
A key priority for Mexico, however, is securing relief from the Trump administration’s 25% national security tariff on Mexican automobiles and 50% tariffs on steel and aluminum, measures that have weighed on some of the country’s largest export industries.
Greer has praised Mexico’s negotiating approach, noting that unlike Canada, Mexico has largely refrained from retaliatory tariffs against U.S. products.
He also cited progress in discussions covering export controls, intellectual property protections and efforts to prevent exports of avocados produced on illegally deforested land.
Canada Pushed to The Sidelines
The latest negotiations come one day after the Trump administration announced new tariffs on nearly $20 billion worth of Canadian imports, responding to Canada’s retaliatory duties on U.S. automobiles, steel, aluminum and alcoholic beverages, as well as Ottawa’s high tariffs on dairy imports.
The move further widens the gap between Washington and Ottawa at a time when Canada has been largely sidelined in the USMCA review process.
Canadian Prime Minister Mark Carney said his government has presented comprehensive proposals aimed at resolving trade disputes with Washington, while arguing that previous U.S. tariffs violated the North American trade agreement.
The contrasting approaches toward Mexico and Canada indicate that the Trump administration is keen on rewarding partners viewed as cooperative while increasing pressure on those it believes have been less willing to make concessions.